Google Junior, Part IISarah Lacy
In Friday's blog I wrote about the nascent ripple effects of the Google IPO, one of which is an appetite for funding new search companies. For all its wonders, there's a lot Google can't or doesn't do well. But I can't decide how much opportunity is there for brand new ventures. It's a meaty topic so I'm dividing my thoughts into a few days and welcoming reader comments along the way. (Hint, hint- see comment submission box to your right.)
In short, there are two concerns I would have, were I an investor. The first is that the Wild West of paid search advertising seems to be getting tamer. I'm not saying it's mature or that the growth is over. But despite Google's comments to the contrary, there does seem to be some anecdotal evidence that companies won't pay just anything for keywords. I've talked to interactive advertising agencies that are spending more of their time analyzing what companies are getting for these increasing keyword prices. When companies are no longer just throwing money at it, it's a sure sign that the price jumps are starting to hurt at least a little. So the growth in paid search advertising may not continue unabated, or may just continue for the market leaders like Google and Overture/Yahoo.
The other concern is more fuzzy. In a world where everyone goes to Google or Yahoo by default, even if your niche site is better, is it enough to change consumer behavior? To look at a real life example, consider Starbucks, Blockbuster, or any other mass brand. I fully recognize that there are independent coffee shops that sell better coffee. In fact, the first time I saw a Starbucks, I was living in Memphis, TN, and I scoffed. It moved in down the street from my beloved independent coffee shop, Otherlands, and I wondered: "Why would anyone go there?" When I moved to San Jose a year later, I figured it out: consistency. I tried more than a dozen independent coffee shops in San Jose only to be disappointed time and time again. I became a Starbucks devotee. It may not be that Platonic ideal of a latte, but it's good and it's always good no matter which one I go to.
Same with Google. And that tool bar on top of my browser is the convenience equivalent of a Starbucks on every corner. So being the creature of habit that I am, I'd need a compelling reason to go anywhere else. And so far someone like Blingo doesn't provide it. It's a less annoying iWon.com. You go, you search stuff, and you win prizes. Only you don't have to enter any personal information until you win and even then it's minimal.
But that's where the differentiation ends. It runs Google's ads on its site, and uses an unnamed third party's search database. I asked around to see if I was the only one who couldn't care less about winning stuff while I'm searching. One of my friends had this to say, "I search because I want to find information, not win some (stuff). Just send me a clown and have him jump up and down each time I do search – that makes about as much sense as a sweepstake to me."
Blingo CEO Frank Anderson insists my friends and I are not the target demographics for the site. "If you step outside the Bay Area, the average household income is $40,000 to $50,000 and a lot of these people aren't even on broadband yet," he says. "To the middle market, search prizes are very appealing. People who like Blingo are the kinds of people who use AOL."
Maybe. After all, living in Silicon Valley, I don't think I know anyone who uses America Online. But it's not enough to make me switch. Tomorrow I'll blog about another search start-up that I find a bit more compelling. Stay tuned.